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Sunday, May 1, 2011

Polarization on the deficit

Related to the post below, Greg Sargent and Jonathan Bernstein make the case for the strategic complementarities between politicians and the electorate implied by the media, that I evoked here. Sargent:

we’re increasing caught in a “Beltway Deficit Feedback Loop,” in which the relentless bipartisan focus on that one topic to the exclusion of others is leading more and more people to tell pollsters they’re worried about it. That in turn reinforces a sense among public officials that it should continue to be their number one focus.

Yes, a feedback loop. Now, that's where the media comes to play. In my opinion, they're in charge of breaking the loop. But if the media is pandering to consumers, then the feedback loop will go all the way. If you want practical consequences of an uninformative media, you just have to look(again, in my opinion) at the impact that polarization has on the debt ceiling debate, or more generally on the economic policies in the US. Standard and Poors' review of the US credit-worthiness was based on political factors, not on economic factors. And if you look at The Economist of this week, which asks "What's wrong with America's economy", well you have it. The leader says

The real worry for Americans should be that their politicians, not least their president, are doing so little to tackle these underlying problems.

On the public debt:

The good news is that politicians are at last paying attention: deficit reduction is just about all anybody talks about in Washington, DC, these days. The bad news—and the second reason for gloom about what the politicians are up to

The question in Washington, apart from how to escape the city on traffic-choked Friday afternoons, is whether political leaders are capable of building on these ideas. The early signs are not encouraging.

The real problem for America is not its innovative capacity, but the fact that its benefits go to relatively few. This is illustrated by a recent paper by Michael Spence and Sandile Hlatshwayo, both of New York University.(...)
These findings present a dilemma for America’s policymakers. Raising federal R&D spending and easing immigration for foreign-born PhDs would boost innovation and company successes, but would not produce many jobs. Mr Spence and Mr Atkinson would like to see government incentives aimed at strategic manufacturing sectors. But such policies have a poor track record. And in any case Congress is in no mood to pay for them, no matter what Mr Obama says.

politicians are ignoring much of the problem. Congressmen have fought bitterly over whether to extend unemployment benefits, with Republicans arguing that it would blunt incentives to work, yet no one has paid attention to the costly rise in disability rolls.